Key Takeaways
- ECB President Christine Lagarde has declared the disinflation phase in the Euro Area is over, noting that inflation is now where the central bank wants it to be and the domestic economy is showing resilience.
- Money markets are recalibrating expectations for an ECB rate cut, now pricing in a 50% chance of a 25 basis point reduction by June 2026, a decrease from approximately 60% before recent ECB statements.
- Stellantis (STLA) CEO reported "very healthy" inventory levels and "very productive exchange of ideas" with the US administration on tariffs, while also calling the European Union's CO2 emission targets "unattainable."
- Lagarde emphasized the stability and liquidity of Euro Area sovereign bond markets, stating they are operating smoothly.
- The ECB will not necessarily alter policy for slight deviations from its inflation target, and risks to the economic outlook are now considered more balanced.
The European Central Bank (ECB) is signaling a new phase for the Euro Area economy, with President Christine Lagarde stating that the disinflation process has concluded and inflation is now at the desired target. Lagarde highlighted the resilience of the domestic economy and noted that risks to the economic outlook are more balanced. She also affirmed the stability and liquidity of Euro Area sovereign bond markets, which are functioning smoothly.
Following these pronouncements, money markets have adjusted their expectations for future ECB rate cuts. Traders now price in a 50% chance of a 25 basis point rate cut by June 2026, a notable shift from the approximately 60% chance anticipated before the latest ECB statements. This indicates a reduced likelihood of aggressive easing, suggesting that the rate-cut cycle may be nearing its end. Lagarde further clarified that minimal deviations from the inflation target will not automatically lead to policy changes, reinforcing a data-dependent and measured approach.
In corporate news, Stellantis (STLA) CEO stated that the company has achieved a "very healthy level of inventories." The CEO also indicated a "very productive exchange of ideas" with the US administration regarding tariffs. However, the automaker's chief also expressed concerns, labeling the European Union's CO2 emission targets as "unattainable."
Lagarde also touched upon fiscal responsibility, stating that "all governments need to operate on the basis of the EU fiscal framework." She avoided commenting on individual countries, maintaining a broad perspective on Euro Area economic health. Furthermore, Lagarde mentioned that trade uncertainty has diminished, and forward-looking indicators suggest that wage growth will continue to moderate, which should help contain domestic price pressures.
In other developments, JPMorgan (JPM) is reportedly planning to develop approximately 2 million square feet of office space in London, potentially making Canary Wharf home to London's largest office. The bank is also exploring other locations in London for its European headquarters. Meanwhile, an EU-Egypt Leaders Summit is scheduled to take place in Brussels on October 22.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.